RPIA SUSTAINABILITY REPORT 2023
OVERVIEW FIRM
29
INVESTMENT MANAGEMENT
U.S. Alternative Investment Manager February 2023
Governance
In Q1, we met with a U.S. alternative investment asset manager that has three main operating lines of business. Due to its decentralized legal entity structure and a centralized operating model, its legal structure poses challenges to providing full transparency into the ESG risk and exposures of its subsidiaries’ underlying funds. One of its three main lines of business includes managing a number of Business Development Companies (“BDCs”), many of which have issued bonds publicly in addition to the bonds issued by the ultimate parent company.
Engagement Focus
We held two meetings with the company, one in December 2022 and another in January 2023 with additional members of the management team. Our conversations focused on the issuer’s reporting and product governance, particularly: • Disclosure of ESG risks and exposures of investments held by entities lower in the issuer’s capital structure. • Robustness of their sustainability reporting (ambitions regarding CSR, etc.) and alignment with regulatory (e.g., SEC) and voluntary sustainability reporting frameworks (e.g., TCFD, SASB, GRI). As a public company, they will be required to comply with the impending new SEC rules for sustainability reporting. In early 2022, they hired a Head of ESG to address current gaps in reporting and disclosure.
Outcome/Recommendations
Our engagement with this company is on-going. We provided several points of feedback to the issuer on our recent calls. We would like to see them doing the following: • Acting as a leader in the alternative asset manager and BDC sectors, specifically having more clarity on the measurement of its climate impact (Scopes 1, 2, and 3). • Setting meaningful emissions reduction targets or a net-zero plan and beginning to see demonstrable execution of any plan. • Creating an ESG Governance Framework and forming a dedicated ESG research team and an ESG committee to strengthen the company’s ESG framework and governance. • Expanding commitments to the social pillar, building on their Community Loan Program. • Eventually considering a green, social, sustainable, or sustainability-linked bond issuance. We intend to hold further meetings with management in due course to receive feedback on our discussion and forwarded materials and questions.
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